AFR.L Regulatory News (AFR)

16 Dec 2008 07:00



Afren plc (AFR LN)

Operational Update

London, 16th December, 2008 - Afren plc ("Afren" or the "Company") today provides an update on operational activities across its portfolio. 

Nigeria

Okoro Setu Project

Production operations on the Okoro Setu Project are continuing to run efficiently. The wells are producing in line with expectations and fine tuning of the production process is allowing Afren, the technical partner, and Amni, the licence operator, to achieve optimal delivery of the well potential and effectively manage the reservoir. 

Production from the field is currently averaging 18,500 bopd from 6 of the 7 wells currently available on the field. The 7th well is scheduled to come on line by the end of the year, pending the arrival of outstanding wellhead equipment. Production is expected to increase to 21,000 bopd once all of the wells are producing.

To date, Afren and its partner Amni have produced over 900,000 bbls from the field with no water and successfully lifted five cargoes for export. A further two liftings are scheduled before the end of the year.  The Company has realised an average price of $53.9 per barrel for the oil sold to date. 

Afren and Amni's near term focus will be to continue to maximise production from the field whilst reducing field operating costs to reflect the current oil price environment.

Ebok Appraisal & Development

The Ebok-4 well was spudded on 24th November using the Trident IV jack-up rig. The well is currently coring the reservoir section. Initial results are encouraging but require validation from the planned wireline logging programme which is scheduled to commence when the well reaches the Target Depth of 3,800 feet. The well will then be tested to establish well deliverability, crude oil properties and reservoir performance parameters, following which the partners will determine the timing and structure of the field's development. 

Ghana

The Cuda-1 well, which was spudded on 16th November, continues to operate in tight hole status. 

Côte d'Ivoire 

Gross production from the CI-11 fields and the Gas Plant have improved by an average of circa 700 boepd since Afren took over as Operator of the assets. This reflects ongoing efforts to maximise delivery from the current wells and producing intervals.

A significant subsurface, production optimisation and maintenance programme is currently underway on the CI-11 fields with the objective of safely delivering incremental production from the existing well base via wireline workovers while establishing the potential for a successful infill drilling programme in the second half of 2009. 

Preparatory work is also underway on CI-01 to evaluate options to develop the gas and oil reserves already defined on the block.

Financial Overview

Afren is in a strong financial position, with an anticipated cash balance of over US$50 million at year end and anticipated annualised cash flow of over $200 million in 2009, based on an average oil price of $50 per barrel, compared with a planned capital expenditure programme of approximately $60 million. The Company is also actively seeking to reduce operating costs, particularly through ongoing negotiations with the contractors and sub-contractors working on the Okoro Setu project. 

Furthermore, additional financial flexibility is provided through the strategic alliance with Sojitz Corporation ("Sojitz"), the major Japanese diversified industrials and investment conglomerate, as announced in October 2008.  The Strategic Alliance will run for an initial period of (i) 3 years from the signing date or (ii) the date upon which Sojitz has invested a total of $500 million in the Joint Acquisitions.

Osman Shahenshah, Chief Executive of Afren, commented:

"I am delighted with the continued operational success demonstrated on the Okoro Setu project, with current production of circa 18,500 bopd, in addition to circa 5,200 working interest boepd from Côte d'Ivoire.

"The operational outlook for Afren is promising, with the Company set to be producing over 26,000 barrels of oil equivalent per day at the start of 2009, which will generate significant cash flow for the business, even in the current price environment. We are continuing to drive down field operating costs through on-going re-negotiations with our contractors, ensuring sustained positive netbacks and profitability to the Company.

"Afren's financial position is strong and I believe the Sojitz alliance will help facilitate exciting acquisition opportunities in the year ahead. Our exploration and development programmes for 2009 are fully funded, and are set to generate significant newsflow for the business over the upcoming year."

Background information

Afren plc

Afren plc (www.afren.com) was founded in 2004 with the vision to become the premier pan-African independent exploration and production Company, through a differentiated strategy based on a strong African representation in the Board and management, partnering with indigenous companies, partnering with National Oil Companies and Governments as well as finding a solution to the vast untapped gas reserves in the Gulf of Guinea. Since the Company's listing on the AIM market in 2005, Afren has rapidly expanded its portfolio to 15 assets across 6 African countries.

Note

In accordance with the AIM Rules, the technical information in this release has been reviewed and signed off by Mr Iain Wright, who is Director of Technical at Afren Plc and has over 25 years relevant experience within the sector. He consents to the information in the form and context in which it appears. The Company estimates its reserves in accordance with the guidelines and definitions of the 2007 SPE/WPC/AAPG/SPEE Petroleum Resource Management System ("PRMS") Classification System.